Was Pappy Maverick wrong? (When buying land isn’t a good idea for farmers)

My favorite TV show of the ’60s was Maverick, hands down. A mix of mystery and non-macho Wild West survivalism pitted Bret Maverick against a deck of cards and his own human frailties. He was known for how his sense of honor struggled to survive against his own interest in self-preservation.

He was also known for his homilies. One homily from early in the show defined my generation in the agricultural business: “Pappy always said, ‘Son, if you get money, buy land. The good Lord is always making more people, but he never makes any more land.’”

Limits to that wisdom

My generation went broke in the ’80s listening to the wisdom of “Fence-row-to-fence-row” Earl Butz, then Secretary of Agriculture, and to the universal wisdom of the time that said that demand for food was unlimited because of the world population boom.

We bought all the land we could finance, and produced ourselves into bankruptcy. Nobody told us that we could feed the world, but not our own families because the world had the people, but they did not have the money to pay for the food they needed.

A cartoon from the bust of the ’80s pretty much told it all. It showed an Asian woman outside her hut, imploring her children: “Eat your food, Babu! Farm children are starving in Kansas!”

A younger generation bought up our equipment at our unintentional penny auctions and leveraged themselves into the good times of the last few years.

In the late ’80s, we witnessed a drought-driven miracle of $3.50 corn. It did not last long, but we saw high prices with high water in the early ’90s.

Fast forward

It was not until last year that prices peaked again. I remember selling corn for over $8 delivered to an ethanol plant and telling the buyer that I was glad I was not trying to make a profit out of it. He answered that his job was easy — the hard job was had by the man next to him who was trying to sell high-priced DDG’s!

Fast forward to the summer of 2013. Corn prices start with a “5,” and there were a few days this month when new crop prices were under $4. Who’d a thunk it!?

This summer, a DTN analyst wrote a major piece about why the party was over. She dealt with long-term trends, and fretted that producers were not sufficiently prepared for the immediate future. I printed the piece and left it on my desk for reference, but it was depressing and it got tossed.

Out of sight, out of mind.

Feeding the world

In the Sixties, we had Paul R. Ehrlich, author of The Population Bomb. He told us that just ahead, in the ’70s and ’80s, we would have mass starvation as the population exploded to numbers that could not be fed.

He spawned a generation of doom-and-gloom greenies that dedicated themselves to preserving the world at the expense of the people living in it. We were going to strip the world bare to feed the growing population, they thought.

Ag economists of the time preached trends that were consistent with Ehrlich doctrine.

At Ohio State, in the late Sixties, and all across the land grant system, we were taught that we were nearing the top of the yield curve. The big advances in corn yields, for example, had already been made. World population would grow faster than we could grow production.

Not so

In fact, the yield curve continues. In the 1960s, the Clark family produced average corn yields of 110 bpa, and were considered at the head of the class. Last year, the Comp and Miller families used the same ground to produce corn that was nearly 200 bpa. The average for the nation has gone from below 100 to nearly 160 bpa.

In the ’70s, the total crop first went over 7 billion bushels for the nation. Last month we predicted just under 14 billion bushels. Ehrlich still preaching. Ehrlich is an old man now, but he is still preaching the same gospel. His conclusions, it is said, are valid, but his timing is off. I guess the fuse was a little longer than he realized.

Meanwhile, the population growth is slowing. Even the UN has drastically reduced its predictions for population growth.

This is no news to Dennis Avery of the Hudson Institute. He was preaching as a voice in the wilderness 20 years ago. He said Ehrlich was wrong.

More on him, and on the theory of long-term cycles as I continue this thought next week…